Affordability is the most important factor for first-time homebuyers

By: Zandile Chiwanza on November 18, 2019

Affordability is the most important factor for many Canadians when it comes to buying a home — which is not easy in some cities, especially when you need a $219,239 household annual income to afford a house in Vancouver.

According to the annual Mortgage Consumer Survey (MCS), released Friday by Canada Mortgage and Housing Corporation (CMHC), price and affordability were the top factors for four out of five buyers (80 %) during their 2019 home purchase.

Earlier this year, the Canadian government announced it would be helping young people buy homes by introducing the First-Time Home Buyer Incentive (FTHBI) to improve affordability. CMHC has provided 10% of the purchase price of a newly constructed home, or 5% of the price of an existing home since September 2019. The program only applies to those with a household income of $120,000 or less, and the total mortgage and incentive can’t be more than four times the buyer’s household income.

After affordability, top home buyer "must-haves" were number of rooms (73%) and proximity to public transport (67%).

“For years in the industry, it was all about “location, location, location,” Colette Kikongi, business planning and reporting specialist for the federal agency told Global News

The mortgage consumer survey offers key insights into the current state of homebuying, homeownership and mortgage lending in Canada. The focus on cost suggests a shift in priorities has taken place.

“One of the biggest stories of 2019 was the dramatic decrease in the number of homebuyers who chose to spend the maximum amount they could afford on their home,” the CMHC reported.

In 2018, 78% of homebuyer – that’s more than three out of every four buyers – bought the highest-priced home they could afford. In 2019, that number fell to just 60%. 

“This suggests that many Canadians may be shying away from the “house-rich, cash-poor” approach of past years,” Kikongi added. 

In order to cut costs, the majority of buyers (59%) reduced their non-essential expenditures since owning a home. The most common area where they chose to cut back on was entertainment (66%), vacations (55%) and food (44%). 

The survey also found that delayed homeownership is on the rise with some people spending over a decade renting before buying their first home. 

The number of first-time homebuyers who had rented housing with family and friends before making their home purchase increased from 28% in 2018 to 44% in 2019 and the percentage of first-time home buyers who were renting on their own before buying a home decreased by 16%.

These results are not surprising as the average time to save for a downpayment is way out of reach for the average resident. Roughly 30 years — to get a 10% down payment on a representative home in Vancouver for example.

This year’s survey focused on first-time homebuyers, but a number of mortgage renewers and
refinancers were also surveyed on select aspects of the mortgage transaction to better understand their thoughts, attitudes and behaviours.

Out of 1,385 recent mortgage consumers, 47% of those surveyed were first time homebuyers, while 53% were repeat buyers.